File this one under foregone conclusions: “$100 oil would have a big political impact” by Gideon Rachman in the Financial Times. Mr. Rachman argues that the implications include more spending by Hugo Chavez abroad and more money for Hezbollah from Iran, worsening human rights from oil exporters like the Sudan, and a dramatic increase in anxiety for Europe to construct a common policy toward Russia. But as long as countries like Germany and the Netherlands continue prioritizing bilateral deals, argues Rachman, the common EU policy won’t get anywhere. A real bouquet of predictions here. Excerpts after the jump.
From the Financial Times:
People facing alarming birthdays often say things like: “Forty is just a number.” You could say the same about “$100 oil”. But such benchmarks concentrate minds. As the oil price threatens to break through $100, politicians all over the world will think hard about the strategic consequences.So what is likely to happen? The biggest single effect is obvious. Oil producers become richer and more powerful. The biggest oil consumers – the US, China and the European Union – become increasingly anxious. Beneath that big trend, there are smaller effects that could change the course of some of the most delicate and dangerous problems – Iraq, Iran, China’s foreign policy and the resurgence of Russia.The effects of a rising oil price on the economies of the producing countries are dramatic. The Organisation of the Petroleum Exporting Countries made $650bn from oil sales in 2006, compared with $110bn in 1998. Russian oil and gas revenues have quadrupled over the same period.When bad governments make good money, they become more relaxed at home and more assertive abroad.Two of the Bush administration’s least loved leaders – Hugo Chávez of Venezuela and Mahmoud Ahmadi-Nejad of Iran – will have more money to chuck around. Venezuelan money already subsidises everything from housing in Nicaragua to cheaper bus fares for the poor in London. (A policy that Boris Johnson, the Conservative mayoral candidate in London, has denounced as “completely Caracas”.) Iran will have more money to fund its nuclear programme and to support foreign surrogates such as Hamas in Gaza and Hizbollah in Lebanon.The Russian government will find it easier to buy off impoverished pensioners and to take tough positions on a range of international issues, from the future of Kosovo to America’s plans for missile defence in Europe.Tyrannical governments sitting on oilfields will be more likely to find protection from powerful oil-consuming countries. China, for example, will be even less likely to support bringing pressure to bear on the governments of Burma and Sudan….High oil prices will only increase the EU’s anxiety to mould a common policy towards Russia. But that is easier said than done. Some countries such as Germany and the Netherlands seem intent on building as close an energy relationship as possible with the Russians. Others – in particular, Poland and the Baltic states – will continue to argue for EU investment in new gas pipeline routes that bypass Russia, and for tougher restrictions on Russian energy investment in Europe.